U.S. Office Markets Draw Broad-Based Demand

Charlotte boasted the nation’s lowest downtown office vacancy rate, followed by Manhattan and Boston, based on CB Richard Ellis’ United States National Office Vacancy Index for the second quarter of 2007. The quarterly report was released yesterday.

“Demand for office space remained strong across the country, as evidenced by the second quarter’s 17 million sq. ft. of positive absorption,” says Ward Caswell, U.S. Director of Research for CBRE. “Net absorption continued to outpace the rate of new completions,” adds Caswell.

With a 3.1% vacancy rate, Charlotte had the lowest downtown office vacancy in the country for the second straight quarter. Midtown Manhattan followed with a 4.8% rate, and downtown Manhattan was third with a 7.0% vacancy rate. Boston had a 7.1% rate, and the top five was rounded out by Las Vegas, which posted an 8.5% vacancy rate.

The lowest suburban office market vacancy rate was Miami at 6.5%. Fort Lauderdale was next at 7.0%. Orlando was third at 7.7%, followed by San Jose’s 8.4% and Los Angeles’ 8.5% vacancy rates.

On a national basis, downtown office vacancy was 10.6%, down 20 basis points from the previous quarter, while overall suburban office vacancy was 13.7%, also dropping 20 basis points from the first quarter.

The downtown market with the largest quarterly vacancy rate decrease was San Jose, which fell 5.6 basis points to 14.4%. Tucson dropped 3.8 basis points to 12.2%, while Houston decreased 2.5 points to 11.9%. In the suburban markets, Cincinnati decreased by 2.1 points, to 18.5%. Columbus dropped 1.7 points to 19.3% and Kansas City fell 1.5 points to 17.2%.

In terms of markets with the highest office vacancy rates, Detroit’s 27% was the highest downtown vacancy rate in the country for the second straight quarter, while Wilmington had the greatest quarterly increase in vacancy among downtown markets, rising 2.6 points to 17.4%. The market with the highest suburban vacancy rate was also Detroit, with a 24.6% vacancy rate, while Phoenix posted the largest quarterly increase in the suburban markets, rising 1.5 points to 13.3%.